Perenna hints at regular broker commission over lifetime of 30-year fixes
Co-founder and chief operating officer Colin Bell (pictured) said brokers would receive commission when they complete a mortgage and receive payments at different intervals over the lifespan of the mortgage “as long as they maintain contact with the customer and [carry out] reviews”.
He suggested these broker reviews would include client check-ins, allowing people to switch onto a new rate as well as port their mortgage to their next home or transfer it to the new owners of a property.
“We’re trying to get the community to think of it as a long-term product and a long-term relationship. So you don’t need to be selling a new mortgage every two years to be paid.
“We will pay people for the work they do throughout the life of the mortgage,” Bell said.
Perenna is funded by covered bonds and not short-term savings or deposits. This means each mortgage will be financed for the lifetime of the fixed term.
Bell said this enabled the lender to consider a five-year early repayment charge for its 30-year fixes. This means borrowers can re-evaluate the terms of their mortgage during a broker review without costly fees or long wait times.
“We want people to have flexibility,” he added.
A covered bond is a portfolio of loans issued by a bank then sold to a financial institution for resale.
With a covered bond investment, the underlying loan remains on the book of the lender that issued them. The interest paid is covered by cash generated from the loans and returns on defaulted mortgages can be subsidised by other existing loans. The risk to investors is considered to be relatively low.
If the lender goes out of business, investors can still receive interest payments from underlying assets.
Perenna aims to offer shorter fixed rate mortgage terms alongside its long-term range but will launch with the latter first. As Perenna awaits its banking license, Bell said the details of its proposition were not yet finalised.
The launch is expected next year.
Top 10 most read broker stories this week – 10/09/2021
This was followed by reports that Sean Tompkins, chief executive of the Royal Institution of Chartered Surveyors, was in talks to step down following various scandals at the association earlier this year.
The government’s proposed 1.25 per cent hike in National Insurance and its ramifications on small business owners and recruitment were also of interest to brokers.
Santander’s launch of more sub-one per cent deals, Halifax’s changes to its bonus commission and overtime income, as well as Cambridge Building Society’s self-employed mortgages proved popular amongst readers.
Lloyds Banking Group faces shared appreciation mortgage lawsuit
RICS scandal – chief executive Sean Tompkins in talks to stand down
NI and dividend tax hike may hit small business owners hard
Halifax increases bonus, commission and overtime income allowance
Cambridge BS launches self-employed mortgages for pandemic entrepreneurs
Holiday let mortgage options more than double as lenders eye the space
Brokers are still treading carefully with mortgage applications – Firth
Santander to cut sub-one per cent remortgage rate further in update
Half of Brits happy to take out a mortgage through a digital-only bank
NI increase sparks recruitment rethink among brokers ‒ analysis
Halifax increases bonus, commission and overtime income allowance
The bank temporarily reduced the proportion last year as it expected this income of type to vary greatly due to changes in employment and working patterns during the pandemic.
Halifax said: “We have continued to monitor the situation closely to ensure we make the right decisions to support our customers and are now updating our criteria.
“Bonus, commission and overtime must continue to represent a regular and sustainable feature of the customer’s income.”
This change will apply to mortgage applications keyed in from tomorrow. Previous rules will remain on applications which have been started before 8 September.
The income types must be entered as normal and Halifax’s online mortgage calculator will be updated to reflect the changes.
Mortgage adviser awarded £23,000 after being unfairly dismissed for ‘moaning’ about long hours
McMahon said she was unfairly dismissed as she had complained about working more than 48 hours a week, which was not required in her contract and is above the weekly working time limit. She also said she had sick pay and commission deducted from her wages.
According to the tribunal, she went to management and told them she was “stressed” about working longer hours, which included travelling, and was dismissed two days later.
The company claims she was dismissed due to poor performance, but the employment tribunal it was clear that management considered her a “moaner”. It ruled the dismissal was unfair as no process was followed and there was not a fair reason to fire her.
Judge King, who heard the case, said: “In respect of the 48 hour week the claimant had not signed an opt out and as such if the claimant was working in excess of 48 hours average across the week then her right was being infringed.”
During her first year of employment, the claimant earned commission and no issues were raised of her performance.
It also noted that in her second year she exceeded the initial earning threshold of £100,000 and proceeded to the next level, received a pay rise and no complaint was made about her performance.
McMahon also brought a claim around unfair deductions to a payslip in 2019, as it did not include adequate commission or sick pay although she was off for two weeks with an illness.
According to McMahon she was deducted over £700 due to unpaid holiday, which she claimed was in fact sickness, in addition to her commission.
The tribunal found that she had raised the issue of her salary and the deductions to her payslip via email and in person, but this was not adequately followed up. This claim was also ruled in her favour.
Skipton BS revises variable income criteria to increase borrowing
The changes include accepting up to 100 per cent of regular variable income, like quarterly bonuses where a similar amount is given semi-regularly, into a customer’s income calculation.
The lender will need 12 months’ evidence in the form of a P60 or payslip for the income to be considered.
For non-regular variable income, such as overtime or sales commission which is seasonally affected or occurs irregularly, the lender will include 50 per cent of this as part of a customer’s income calculation, or 100 per cent if the income is established as “sustainable”.
To ascertain non-regular variable income the lender will ask for two years’ worth of evidence.
The lender changed its criteria during the pandemic, having previously accepted up to 100 per cent of guaranteed other income if a borrower could provide two years’ worth of evidence.
It changed this to 50 per cent across the board during the pandemic due to uncertainty around job stability and other income such as bonuses and commission.
The lender said that if borrowers had received furlough or a Self-Employed Income Support Scheme grant it would need two years’ of evidence and would take the lower of the last two years when income fell, or an average if it increased, into its assessment.
Mortgage broking revenue dropped 4.2 per cent last year – FCA
The revenue figure comprised £995.8m in commissions, fees of £259.4m and other revenue made up £6.4m.
Commission represented 78 per cent of brokers’ income, up from 77 per cent in 2019.
The data is taken from the regulator’s Retail Intermediaries Activity Return (RIAR), which collects information from firms providing advice on mortgages, insurance and retail investments.
The income decline of mortgage brokers compared to a one per cent fall for retail investment intermediaries to £4.40bn in 2020.
Meanwhile, insurance brokers enjoyed a 1.2 per cent rise in income to £18.62bn last year.
The RIAR categorises firms based on their main type of regulated business activity.
The categorisation methodology was changed for the 2020 analysis, which may have had a impact when making comparisons to last year’s figures.
It is time to end undisclosed commissions – Jannels
At the heart of this is a recent court case that has wide ranging implications for the lending industry.
The outcome of the case makes it clear that if a lender has paid a commission to a broker which has not been disclosed to the borrower, that lender is now more at risk of the entire loan being set aside.
In situations where a loan is set aside this can mean that a lender will have to make a substantial payment to the borrower and, in some cases, the lender might also be required to pay damages.
At the Association of Short-Term Lenders (ASTL), we believe this to be a matter of the utmost importance.
We are working alongside our colleagues in other trade associations such as Financial Intermediary and Broker Association (FIBA) and the National Association of Commercial Finance Brokers (NACFB).
We are investigating the introduction of a standard minimum level of ‘lender to consumer’ fee disclosure for all of our members at the earliest stage in the process to ensure protection from retrospective claims in the future.
We think it’s really important that all participants in the market ensure that they don’t leave themselves open to retrospective questioning and claims.
The regulator historically has never drawn a line in the sand and so will judge a complaint dating back 10 years, for example, based on today’s rules. This is another issue we feel warrants examination at some point.
Need for consistency
Arguably, regulation probably should have encompassed what we know now as non-regulated mortgage business from the outset in 2004, as this would have created a level playing field with no room for ambiguity.
Many mortgage deals in the non-regulated market are already written as if regulated – we now need to agree a consistent approach. However, we should not be suspicious about this approach being rolled out across the whole of the non-regulated sector.
If anything, increasing scrutiny of non-regulated loans serves only as confirmation that these are becoming a more integral part of the mortgage lending landscape for many customers and intermediaries. The sector is growing, becoming more mature and with that comes additional considerations and obligations.
It’s time to end undisclosed commissions.
However, we should not mourn their passing but rather celebrate the growing evolution and importance of specialist finance and short-term mortgage lending. At the ASTL we intend to play a big part in this initiative.
Clients accept solicitor fees as ‘necessary cost’ but not brokers’ – Star Letter 25/06/2021
This week in a Marketwatch piece, HD Consultants owner Howard Reuben, Rose Capital’s managing director Richard Campo and Darryl Dhoffer, mortgage and protection consultant at The Mortgage Expert debated whether broker fees should be on a par with solicitors fees.
They suggested that due to a higher volume of business and heightened property prices there should be a restructuring of procuration fees, commission, and broker fees to better reflect the increased workload.
Paul Smulovitch said: “The difference here is the perception. Most clients accept a solicitor is a necessary cost and will pay accordingly, however, regarding brokers some clients are aware they can do without or use effective robo-advice so it is being sensible and justifying the charge.”
He added: “However, as most conveyancers charge circa £1,000 for work, as a broker fee this is not unreasonable at all.”
Adam Hosker said: “[It is] your business. Charge what you think works best for your business. If you think broker fees should match solicitors and be based on case complexity, then do it.”
Broker fees should match solicitors’ and be based on case complexity – Marketwatch
Meanwhile, some fees charged by brokers have remained the same as have commission and procuration fees. While the higher volume of business and raised property prices may have provided a boost to earnings, advisers are arguably working harder for their money.
So this week, Mortgage Solutions is asking: Could there be a restructuring of procuration fees, commission and broker fees to better reflect the work that goes into each case?
Darryl Dhoffer, mortgage and protection consultant at The Mortgage Expert
Looking at fees, this can be quite subjective. There is probably more of an argument now for upfront broker fees to be charged at point of application, as criteria has seen fundamental changes due to pandemic and impact to the economy. This has required a lot more research in lender selection to obtain the best overall deal that meets criteria, than ever before.
Our business model is different as we specialise in complex credit cases, and we charge standard fees on mortgage offer or on completion, so a lot of front-end work is undertaken at our cost.
We don’t think it is fair to charge a client a fee if a case cannot be placed without a successful outcome.
As an industry, we do believe our broker fees should be in line with what solicitors’ legal fees would cost. The more complex the case the higher the fee.
As for procuration fees, it would be great if there could be an increase as standard procuration fees have remained fairly constant for many years now, particularly among the high street lenders.
I appreciate lenders have seen margins slashed, largely down to the pandemic, however with this year’s potential emergence out of Covid and record business volumes being written for the majority of lenders, in some cases historic highs, then a review of procuration fees would be always welcome.
Richard Campo, managing director of Rose Capital Partners
For me there are two parts to this; firstly, we are in an exceptional period and that has to be taken into account. Roll the clock back 18 months, no one saw Covid coming, all the knock-on impacts that is having and will have for some time to come.
Nor did anyone predict a roaring housing market, the likes of which we haven’t seen since 2007. Throw in a stamp duty deadline and limited capacity and yes, life is exceptionally hard work right now.
However, nothing lasts forever, and it will settle down as the year progresses and Covid restrictions ease – as remember, many banks still rely on international back office support which isn’t there at present.
Secondly, we are professional advisers and should charge for our time accordingly.
The very reason we charge a fee as a firm is that gives us the income to employ case managers which takes a lot of the burden away from both the clients and advisers so they can focus on what is important to them.
We have a flexible fee arrangement, so for complex, time consuming work, we charge more. For simpler work, we charge less or sometimes not even at all. It’s all about the work involved.
So if you aren’t being paid what you think you are due, charge more.
We justify any fee we charge five-fold and we have never had a client complain once they see the work involved on some cases.
Howard Reuben, owner of HD Consultants
Some lenders are very quick and efficient, other lenders are not so ‘user friendly’.
And the same goes with the conveyancers, valuers and of course, the quality of the brokers too.
We are not finding that the clients are the main problem, so really, why should we charge them more just because some of the cogs in the wheel are not as efficient as they used to be?
There is certainly a mix of mortgage adviser in the market, from those ‘fee-free’ salespeople who really just want to sell mortgages, to others who spend a lot more time carrying out full fact finds and properly advise on debt protection, family insurance, wills, trusts and other ancillary financial planning solutions too.
I see the argument that where some lenders are selected by the client, that maybe we should consider charging more because the processing from these slower lenders could mean twice as much work.
It could equate to spending 10 hours on one mortgage with a £500 fee, but this is ‘turnover’ and not profit. So, what does the actual earnings really equate to for the individual broker after office, compliance, support and processing time costs are all factored in?
We are a business after all.
We find it really important to also focus on the lender service levels in order to ensure speedy application-to-offer processes, which helps all parties in time and money.
HSBC accepts overtime as mortgage rates are cut
Under the lender’s altered policy on variable pay the most recent payment must have been received in 2021.
Quarterly, half-yearly or annual bonus payments can also be used to support mortgage affordability.
Following the rate cuts, HSBC now offers a 90 per cent LTV two-year fix if 3.44 per cent fee-free or 3.24 per cent with a £999 fee.
Five-year equivalents are available at 3.44 per cent or 3.64 per cent fee-free.
At 85 per cent LTV, the lender offers a two-year fix of 2.54 per cent with £999 fee or fee-free at 2.84 per cent.
Five-year equivalents are priced at 2.84 per cent or 3.14 per cent fee-free.
Michelle Andrews, HSBC UK’s head of buying a home (pictured), said: “We are all looking forward to normality returning, and the inclusion of overtime, commission and bonuses to support a mortgage application is one bit of normality that will be welcomed by many looking to move onto or up the property ladder.”